Many states are putting forward a very ambitious EV adoption timeline, and there’s some domino effect that could come from that. As a consumer, business, or even insurance company, how do you account for these processes?
State Regulations and Unintended Consequences
California, Washington, Oregon, and New York have all put out edicts that say by a certain date, all vehicles have to be electric that are sold—could be 2030, 2035, and sometimes it’s just banned outright. The sale of gasoline vehicles in that state, and those rules and regulations are designed to speed up the process of selling electric vehicles. However, there may be some unintended consequences and even unprepared results from those. Let’s take a look at them and see how you can benefit from them as a business or avoid consequences from them as a consumer.
Grid Capacity and Sustainability Challenges
The first question is: will the electric grid be able to handle all these EVs? In a state like California that already has the largest percentage of electric vehicles in the country (16% of cars sold are fully electric), questions arise about sustainability. If you have all these EV chargers, but they’re fueled by coal power plants, is there much of a net difference in the climate? If not, how is that going to affect the laws being put in place, possibly necessitating additional regulations?
Power Generation and Insurance Preparedness
Certainly, California is putting in new power plants and shutting down some of the old fossil fuel generators. Still, they’re having to buy power from natural gas plants to prevent blackouts. Additionally, if these power systems aren’t built to modern standards, some of these battery systems can catch fire. Is the insurance market prepared for that potential new risk?
Battery Recycling Challenges
Another concern is recycling the batteries. If a battery on an electric vehicle lasts 10 or 12 years, what do you do at the end of that time? Unlike a gas tank that can be left empty, a worn-out battery needs proper disposal or recycling. If there’s no plan in place to manage this waste, it could become a potential problem, similar to nuclear plant waste.
On the opportunity side, there are many hundreds of billions of dollars in rebates, subsidies, and incentives for clean energy. The government is actively boosting this, creating opportunities for businesses in wind, solar, battery energy storage, etc. However, businesses in this sector need to consider the speculative risks associated with uncertain future business models and potential hazards like natural disasters affecting infrastructure.
Insurance Challenges in Renewable Energy
Risks extend to insurance coverage. If you have a big solar farm, for instance, and there’s a hailstorm, how is that going to affect you or your insurance company? Insurers are starting to factor in such risks, but it’s crucial for businesses to ensure their coverage aligns with their actual risks and potential liabilities.
Many questions about the future of EV adoption and non-fossil fuel development remain unanswered. Whoever addresses these questions best will be in a position to avoid potential consequences for not being prepared or, more importantly, take advantage of opportunities arising from the migration to electric vehicles or other non-fossil fuel developments.